Wednesday, November 18, 2009

Damageless music infringement

EsNtion Records, Inc. v. TritonTM, Inc., 2009 WL 3805827 (N.D. Tex.)

Talk about snatching defeat from the jaws of victory. Watch as an apparently unassailable copyright claim falls apart.Plaintiff EsNtion, which I’m just going to call plaintiff, is an independent record label; it sued defendant TM, which is in the business of programming music for radio stations.TM sells subscriptions to radio stations and DJs, including a weekly subscription called HitDisc, which consists of one or more CDs with songs that subscribers use to update their playlist.Plaintiff sued for unauthorized inclusion of its songs on the CDs, also alleging DMCA violations, trademark infringement, and unfair competition.TM disputed a bunch of the allegations and argued that it got the songs at issue from plaintiff, its recording artists, or a promotional company working for it, and that inclusion on the CDs provides a promotional benefit.

Plaintiff pled infringement of 235 songs, but TM argued, without rebuttal, that it didn’t distribute 211 of them.Whoops.Then, for eight of the remaining songs, plaintiff only pled pending copyright applications.The Fifth Circuit follows the (wrong) rule that jurisdiction requires only that the Copyright Office receive the application, deposit, and fee.But plaintiff didn’t even meet that standard, because it only submitted emails from the Copyright Office indicating that “registration claims” had been submitted, but not indicating that the fee or the material being registered had been received.

Then, TM argued that plaintiff didn’t own or have an exclusive license to many of the recordings at the time of the alleged infringement, with no written agreements in place.The court found evidence of licensing agreements that supported plaintiff’s claims for most of the remaining songs, but three more were knocked out that way.

Plaintiff didn’t register before the infringement began, so it wasn’t entitled to statutory damages or attorney’s fees.All that was left was actual damages, and here’s where disaster really struck.Plaintiff’s president was unable to identify damages from the infringement, including lost sales or contract opportunities.Plaintiff also submitted expert reports, but the court concluded that they didn’t support a finding of actual damage, because neither expert opined on that—one “assumed” that plaintiff would prove its allegations of infringement (I don’t get why this is disqualifying, unless the expert actually assumed that plaintiff would prove damages, not just infringement) and the other stated that the infringement “could” cause damage to an independent record label, but didn’t conclude that there was actual damage.

Under Davis v. The Gap, a reasonable royalty is an alternative method of calculating damages where both defendant’s profit and plaintiff’s lost sales are impossible to figure out—why wasn’t that available?Hypothesis, though there's nothing in the opinion or on defendant's site that makes this clear: because these are promotional CDs, the copyright owners who choose to participate in this market might provide them for free, making the market-set royalty $0.Usually, the law leaves it to copyright owners to decide whether they want to participate in a market, and will find infringement even if the infringement increases the value of the work—but there might be infringement without damage.

In any event, there was also no evidence that TM profited from the infringement.It didn’t sell songs or CDs, but only profited indirectly from selling its subscription service.Its revenues didn’t depend on the songs at issue and no one specifically requested them.

Without any damages, TM won summary judgment on all the copyright claims, including contributory and vicarious infringement.Even worse for plaintiff, TM might be entitled to a fee award as a prevailing party (though, having failed to register on time, plaintiff wouldn’t have been eligible for a fee award had it prevailed), based among other things on bad litigation conduct including failing to amend the complaint to remove the songs that never appeared on TM’s CDs.

Plaintiff also brought a DMCA claim for removal of copyright information and provision of false copyright information.TM argued that it didn’t have the intent to induce, enable, facilitate or conceal infringement, as required for liability under §1201, and that it didn’t remove any information.TM claimed that it had no incentive to remove such information and instead makes it as accurate as possible.And, none of plaintiff’s CDs had any electronically-embedded copyright information; some courts have limited CMI coverage to electronic information, though the statute isn’t written to make that the obvious conclusion.Anyway, though the evidence might show that TM threw away the physical copies of CDs sent to it, the song information, including copyright and other identifying data, was input into a database available to subscribers.The court thus dismissed the DMCA claim.

Plaintiff also brought §43(a)(1)(A) and (a)(1)(B) claims.First, it failed to show harm, as required for constitutional standing.There was no evidence that it lost anything, or that TM gained anything from including the songs.(Not that I mind this foreshortened analysis, but I will note that the typical trademark argument is that loss of control over one’s reputation is sufficient harm in confusion cases.)Even if plaintiff had constitutional standing, it would lack prudential standing.(Again, note that this test is usually only applied to §43(a)(1)(B) false advertising claims, though if you are going to do the ridiculous antitrust-based prudential standing test that has attracted so many circuits then it’s a little less silly to apply it to both branches than applying a competition requirement.)Plaintiff argued that TM engaged in literally false advertising by using plaintiff’s name without permission, causing customers to buy TM’s products instead of plaintiff’s.TM allegedly sold compilation CDs to companies that would otherwise have purchased plaintiff’s products.The court found this argument insufficient, because the evidence didn’t show that the parties competed; TM sold subscription services, not CDs.Nor had plaintiff shown any damages.(Really this claim is barred by Dastar and materiality, not standing.)

Plaintiff’s unfair competition claim failed for want of any independent tort.Plaintiff argued that TM attempted to confuse consumers by using plaintiff’s name on its CDs, but this was just trademark infringement.

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